For most people, title insurance is not an option. When you go to a bank to get money to refinance or buy a home, lenders require title insurance. Their money is on the line. Lenders want to know that the collateral being used (your property) is free and clear of liens, if they have to foreclose on the loan.
But even if you were purchasing a house with cash, you would especially want to be sure that your property’s title was clean and clear – that there were:
no forgeries, incorrect signatures or breaks in the chain of title;
no restrictive covenants that you were not made aware of;
no unreleased mortgages, unpaid taxes, judgements, bankruptcies, mechanics liens, federal or state tax liens,
…and every other imaginable thing that doesn’t usually happen, but too often does!
If problems do occur, title insurance pays the legal fees to defend a claim against the property. While a lender’s title policy is only in effect during the life of a loan, the owner’s policy lasts long as the owner owns the property. And, while a lender’s policy protects a lender only for the amount of the loan, the owner’s policy can protect a homeowner for the appreciating value of a home. Unlike other insurance which requires annual premiums, title insurance is paid only once at closing and is in effect for the entire time of property ownership.
